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The Halfords (LON:HFD) share price - buy for its dividend payment?

22nd Mar '19 by Jack Brumby

Knowing how to steer clear of disastrous investments is just as valuable as picking winners - this is why legendary investors such as Seth Klarman always advise prudent risk management. Take Halfords (LON:HFD), for example, which is an adventurous contrarian company in the Consumer Cyclicals sector.

Halfords (LON:HFD) pays out a rolling 7.41% of its share price in dividend payments. But sometimes a high dividend yield can signal skepticism from the market. How do we know if we can trust Halfords's forecast yield?

One way to check is to see whether its financial health is improving or deteriorating by looking at the company's Piotroski F-Score.


Why you need to know the Piotroski F-Score

Followers of celebrated accounting professor Joseph Piotroski are well aware of the checklist that made him famous at the turn of the millennium. Piotroski is behind the F-Score: a simple indicator that is an entire quality and fundamental momentum screen in a single number.

The F-Score is made up of nine checks split up into three main areas of financial analysis. First is profitability, where it examines operating profits and cash flow to make sure the business can sustain itself and pay dividends. Then come three checks on the capital structure of a business, followed by a final look at the firm’s operating efficiency.

What Halfords' (LON:HFD) F-Score means for its dividend

Stockopedia applies algorithms to its stream of financial data to automatically calculate the Piotroski F-Score for every stock on the market. It shows that Halfords (LON:HFD) scores 8 out of a possible 9. Here is more of a breakdown of its performance:


By investing in companies scoring 8 or 9 by these measures, Piotroski showed that, over a 20-year test period through to 1996, the return earned by a value-focused investor could be increased by an astounding 7.5% each year. Even better, it suggests that the company is well-placed to continue to pay out attractive dividends.

What does this mean for potential investors?

Halfords has an F-Score that suggests it could be a promising investment candidate worthy of further research - but it's only a first step. Higher F-Score stocks can still have weaknesses and may trade at premium prices compared to other stocks. We've identified some areas of concern with Halfords that you can find out about here.

Alternatively, if you'd like to find more shares with high F-Scores, just come and take a look at this High F-Score screen.

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